Women’s financial inclusion in India

Women make up more than half of the 1.3 billion Indian population, a majority of whom live on under $4 a day. Women are significantly less literate and less likely to participate in the labor force than men. They are also more likely to be unbanked: there remains a 7% gender gap in account ownership, according to the 2014 Global Findex and a 14% gap in usage, according to Omidyar Network. Recent research conducted by Women’s World Banking puts the percent of un and underbanked Indian women at a whopping 62% or 411 million women.

Although India’s “no-frills” PMJDY bank accounts and its government-backed insurance and pension schemes are promising developments—and are reaching a far larger segment of the low-income population than ever before—they do not go far enough to solve the financial inclusion challenge, especially for women. As of 2016, only 38% of women had PMJDY accounts and usage remains incredibly low.

So where does one start in the effort to turn low-income Indian women into more engaged users of formal financial services? Women’s World Banking’s research, supported by West Elm, shows that one promising place to start is inside India’s factories such as in bedding and garments.

Factory workers: a captive market

The demographics alone make a strong case: The country’s garment industry employs approximately 6 million people, 80 percent of whom are women and the majority of whom are in the two lowest income segments. But what makes these factories especially promising as a launching ground for increased financial inclusion is that it can build on existing benefit programs that workers use and value.

Women’s World Banking, in partnership with West Elm, looked at Fair Trade Certified factories*, which already offer salary payments through bank accounts and a variety of benefits such as purified water, free meals and snacks, educational access for children, and informative health-care fairs. Building on these services – including expanded financial products and education – would have immeasurable long-term rewards.

Indian low-income factory workers’ financial behavior

Most workers rely mainly on their salary accounts for daily needs and short-term savings. The majority of workers in the study, both men and women, used informal saving strategies such as chit funds or employees in assets for any goals beyond their daily or monthly expenses. For emergency needs, workers usually opt to borrow money from friends and family rather than from financial institutions, which require documentation and collateral that can seem too formal or daunting.

Financial and non-financial services as workers benefits

When it comes to benefits, the workers in our study said they prefer small, frequent, in-kind benefits. Workplaces can seize this opportunity to create regular financial education sessions on the value of building long-term assets, paving the way for workers to seek out and use financial products that will help them better meet their families’ needs in the long run.

The findings in the study are also poised to have much broader implications. Millions of workers in the world’s most unbanked countries work in factories, and if programs in India’s factories have positive results, those programs can be scaled to other workplaces and regions. The result: Life-changing improvements in the financial inclusion of low-income men and women, not just in India but worldwide.